PoS2: It’s not about the gas

China and Russia just unveiled a sweeping new package of gas deals, and the reaction is predictably feverish.

Moscow trumpeted an increase in flows through Power of Siberia (from 38 to 44 Bcm per year), a modest expansion of the Far East pipeline due in 2027 (from 10 to 12 Bcm), and — most eye-catching of all — a new cooperation agreement on the construction of Power of Siberia 2, a 50 Bcm mega-pipeline that would funnel Siberian gas into northern China.

On paper, this looks like a decisive deepening of the Sino-Russian energy relationship. And politically, that’s exactly what it is. Markets, however, should take a breath.

These announcements change almost nothing about the immediate global gas balance. The only genuine new molecule commitments are small increments (six Bcm here, two Bcm there) that will barely register against the ~430 Bcm that China consumes annually.

The big headline item, Power of Siberia 2, remains stuck where it has been for two decades: in the world of MoUs, feasibility studies, and presidential handshakes. There is still no gas sales agreement, no firm construction timeline, and no sign of commercial terms that would make the project bankable.

Gazprom CEO Alexei Miller hailed a “legally binding memorandum” to build the project: a sublime oxymoron that perfectly captures the essence of PoS2, the great gas pipeline that is always 10 years away.

However, there is substance to the symbolism. Deepening Sino-Russian relations will loom large over the post-2030 energy market, colouring commercial perceptions and exerting a chilling effect on LNG contracting efforts.

Furthermore, it challenges the US to recalibrate its energy diplomacy towards Russia, and raises the stakes on Europe’s strategic alignment with China over the energy transition. The cooperation deal is loaded with significance that is worth unpacking.

💥 Article stats: 1,300 words, 8-min reading time